Ep. 16: Compensation – The ONLY Way to World-Class (2 of 4)
Creating the perfect company from the organizational experts MultiView Incorporated. This content is based on MVI's work with over 1,300 organizations extracting nine eighty nine data elements with nine twenty two cross calculations over twenty seven years on a monthly basis and then systematizing the operational success patterns of the ninetieth percentile. Our intent is to get beyond the brag and the boast and simply share insights from our experience without manipulation or coercion to sell anything except helpful ideas. These messages range from intimate recordings from the Awakened Forest to concerts, national conferences, and broadcasts.
Speaker 2:Okay. Let's continue our discussion of this fascinating topic of compensation. So I'd like to discuss outliers. It's a topic that MVI or MultiView know very well after twenty seven years of measuring hundreds of organizations, putting our little piece of software on the networks, extracting 989 data elements with 922 cross calculations on a monthly basis, and then compiling all this in our data center in Florida. And, of course, we have to know what the fiftieth percentile are doing Because to have any legitimate claim of being a true professional in any endeavor, you have to know what the average is.
Speaker 2:And, of course, if we're looking at it on a normally distributed bell curve, the fiftieth percentile are where most of the measurements of central tendency converge. This would be, again, the median, the mode, average, of course, to a lot of people. It's also what we refer to as where the herd resides or the huddled masses. Okay? And these people are doing the best they know.
Speaker 2:These organizations are doing the best they know. They are doing average. But that's really not what MBI is that interested in. MBI is interested in the practices or the success patterns of the ninetieth percentile, or the red X if you were looking at that normally distributed bell curve. That's where the action is.
Speaker 2:And the question is always, what are these organizations doing? And it's always a distinct minority. And that's the curious thing about best known practices. And we say best known because nobody has the whole enchilada. No one knows everything.
Speaker 2:Right? So we have to introduce a little bit of humility here. But they're doing it different. And it's always a distinct minority. It may be five organizations out of 5,000.
Speaker 2:It may be 10. It might even be one. But having the intelligence to say something's going on here, it can be quantified. And then asking the intelligent question, what are they doing? Sometimes it's a person with a particular talent.
Speaker 2:Sometimes it's something that's very considered and thought out. Normally it just happens. And it's just some bright flame comes into an organization and says, this is how I think this should be done. Gain the authority to do that. They do it.
Speaker 2:And half the time, they're not even conscious that it's the best known success pattern. Why? Because it just comes natural then, oh, duh. Everyone would do it like this when no, they don't. They don't know they're doing it especially.
Speaker 2:And this is why there's huge value in benchmarking and measuring yourself against the external world. Your own numbers, your own budget, your own forecasts don't mean very much. How do you measure up against the competition or those like organizations? I mean, that's that's reality. But without that professional insight into what's happening in the broader universe, you get isolated and you don't realize how good you're doing, how bad you're doing in different areas or if it's mediocre.
Speaker 2:And of course, most of your measurements will be mediocre if you're in business. If they're all bad, you will not be in business very long. And what do we know about this bell curve, the red x, the ninetieth percentile? We know that every one of them, every one of them has unusual and different compensation methods. They're not just paying hourly, they're not just paying salaries, they're doing non traditional things.
Speaker 2:Every single one of the ninetieth percentile. Now I suppose some organizations might be able to do it without having creative compensation systems. We just have never seen it in twenty seven years. And I will say this, if you do start measuring yourself against your peers, which again, highly intelligent thing to do, and there's so many business sectors and industries that do not have great benchmarking, we have better benchmarking than hospital systems and such. Again, we've been doing this a long time, very, very thought out, but more data elements automatically extracted, but you get this objectivity.
Speaker 2:I was working with financial institutions, brokerage houses, because again, we're very good with that type of thing as well as customer service and all this. And I was just shocked how little comparative data there was. So your numbers may not be that good when you first look at them. Well, that's fine. The best time to put a creative compensation system is in troubled times.
Speaker 2:Why do I say that? Because it will rocket you out of that valley. Almost every organization that's been rescued or completely turned around, it's come through the compensation system. And, again, realizing this world of incentives as well as disincentives and learning to use them as a tool for the workforce. And I'll just say this, where you end up on that bell curve is up to you.
Speaker 2:The CEO needs to make that bold move and get beyond the fear barrier and say, hey, we're gonna do this. We're gonna pay people richly. It's gonna be fair. We're not gonna babysit people. I mean, so many comp systems are like Pampers, where we just baby people along.
Speaker 2:We don't really stretch them. We don't really grow them. We don't give them enough resistance. And we think that that's what will give them satisfaction in life. And, of course, if you've listened to any of our messages, you know that the path to happiness and achievement have to come from struggle, have to come from overcoming resistance.
Speaker 2:And you can set that up in your system so when they earn their paycheck, they know that it's earned and it wasn't just given to them. And they know when they get sloppy or slack that they're going to feel that. And they're not gonna be compensated for being slack, but they're going to be compensated for their productivity, for them doing the right thing, great customer service, whatever your standards are. Because all of your compensation is tied to the standards of your organization. And the one thing as we pull out all these data elements from hundreds of organizations is we noticed the bank account.
Speaker 2:We noticed the investments, liabilities, everything coming out of the accounting system, of course. And a fat bank account is the most convincing evidence of what? Profitability. And what we're looking for is really good profits and not bad profits. We want money that's accumulated over time, and normally we suggest from six to nine months of cash, your near cash.
Speaker 2:That way you can withstand all the changes in your environment, or if a competitor that's working with MultiView in whatever business sector, investments, health care, starts to blow you away and eat away at your market share that you've got enough money which buys you time to retool. So this bank account is very important. Now it takes no talent just to slash costs and compromise quality to build short term profits. But what do we know? That doesn't last.
Speaker 2:So what we're really concerned about is building a quality organization, actually valuing quality over speed. It's just like when you put together, let's say, a book. Well, I mean, you may have great content, but if the editing is just horrid, you know, people will kind of be turned off from that. And the public will not value that because they just expect that as a normal condition. Obviously, the value has to be there, but valuing that quality over speed, that's a great principle in all of business.
Speaker 2:I think people try to rush through life. They try to get rich quickly. They try to skip all these steps that a human being or a human organization have to go through to become that quality world class organization. And there's no short changing or sidestepping life and quality. Quality comes out of the individual, normally a person that's well seasoned, that has been through ups and downs, the mountaintops, the valleys, but has a very clear high aspiration of quality and what customer service looks like like in the NVI world.
Speaker 2:Well, we go years without a single phone call not being answered within three rings. I think the longest we've ever went is four and a half years. Right now, we're at three years. But ring, ring, ring, someone's there. You you don't get an automated system or anything like that.
Speaker 2:You get a real competent person. Boom. That you can understand. And that's how we foster customer delight, and that's how you keep clients for decades. And so a business that's quality, because you can have all kinds of quality products and services and all that, but if your service sucks and it doesn't have that sensitivity to hear the unspoken need, doesn't have the intelligence to interpret what's being said, where we don't make sure that we validate and match, and all these things that are taught in the perfect phone interaction, your business will suffer.
Speaker 2:And it comes down to the quality of your training systems. But what is your number one training system? It's your comp system because every check can be transformed into a report card where they get it and go, wow, that's customer service thing, all that, boy, that pays. I think I'll do more of that. Oh, going out to standard is a bad thing.
Speaker 2:I think I'll stop doing that. And it's almost as easy as that. But as an employer, as the manager, you have to create those conditions for success by providing the incentive, as well as equally providing the disincentive. And that's where people get hung up. They fail to provide the disincentive.
Speaker 2:Now right or wrong, the world measures success in financial terms. Of course, we know life is much more than that. I mean, money is just one thing, and at a certain point, it wears out. I mean, after you have so much accumulation, it's just like, god. What's another house?
Speaker 2:What's another, you know, digit on my bank account or whatever? It wears out, And everybody gets that. I mean, even if you haven't amassed a lot, you realize that you can be paid piles of money and just have a miserable life because what? The wealth, the work atmosphere is bad. The boss is a crappy manager.
Speaker 2:And after a while, you'll just go, it's it's not worth it because you get that your life is being fretted away. But to the world, money is how they measure success. And Wall Street and all that, they love growth, constant growth, constant more, more, more, more what? Money. Until sometimes this more upon more mentality, there is no quality left.
Speaker 2:All the juice has been squeezed out of the fruit, and all that remains is a rind. And what if you don't use creative compensation methods? What are your options then? Well, you can use traditional methods, and guess what you're gonna get in this fair and just world? You're gonna get traditional and very similar results of whatever that system is.
Speaker 2:Right? Whatever the inputs are, that's what the outputs are going to be. So if you're using traditional methods, you're going to get mediocrity. You're going get the fiftieth percentile. Okay.
Speaker 2:Well, we can keep going down just the regular road or we can take another approach, the hard ass management approach, where we just drive people. This old school thinking where we lord over people and actually make sure people are doing their jobs, which, again, in our world that went out about twenty years ago. If you design the comp systems correctly where people can self regulate their behavior and stuff, they need far less supervision. So that's an option. You can be the hard ass manager and just drive people.
Speaker 2:Or I suppose there's another option, a third option. You can become so highly evolved in consciousness and spirituality where compassion is rolling through your veins by the court, and just everybody does their job. But again, that's not been my experience in reality. So therefore, let's think about the results we want, the quality we want, get that vision out there, and get creative about providing, again, the incentives as well as the disincentives. Now in the last presentation, last time we were together, my friends, I made the statement that people behave the way they're paid and that we all get paid in all situations, and we illustrated how the volunteer gets paid.
Speaker 2:Even the amoeba, of course, gets paid. I mean, this single celled organism is moving towards a payoff. Right? Some glimmer of food or warmth is going away from those cold and things that are not life affirming, and thus is the world. And a human being acts the same way.
Speaker 2:Again, the incentive, positive for the amoeba, going away from cold, whatever would kill me, non food. Okay. So that is the way the organism works, And so we just have to embrace that. So the point is everything we're doing, every action in life, every cell in your body, every particle of anything is behaving in a similar way because that's just the way nature works. And we have to look at it beyond just financial.
Speaker 2:We have to look at the non financial rewards, emotional satisfaction, the increased inner sense of wellness, all these things. And I'll just say this, that sense of inner satisfaction, that feeling of contentment, that is almost the ultimate. Because when you get to the deathbed scenario, and in all of our end of life and hospice work, we've been doing this for almost three decades. And it's the same things that people say over and over. But most of the time, they realize that sometimes they say, well, I worked too hard.
Speaker 2:I didn't spend enough time with my family. There's all these regrets. Or I wish I would have did something different. I I wish I would have just released the whole reins and let the horses run wild. And and I think that's one of the aspects of casting a vision for the company, for each member on that team, that payoff, that inner satisfaction from actually accomplishing something that's noble.
Speaker 2:Now I don't care you don't have to be doing hospice work. Yeah. That's very noble work. But you could be making shoes, you could be running an exercise gym, you could be doing all kinds of things that contribute to really the human experience. And I think that within all organizations, one of the payoffs, the nonfinancial payoffs, is just incredible customer service or creating this customer delight.
Speaker 2:Just really taking care of people. And that turns a certain type of person on. Not everybody because not everybody's at the same level consciousness. I mean, we need the low consciousness of this world, the litters, the cheats, the liars, all that. Somehow they have to exist, but you find these more noble people through your people selection process, which is, again, the first process in people development, your talent attraction processes, and how do you find those in a very efficient way, people that are sold out to service and helpfulness towards others.
Speaker 2:And and, again, this is a form of compensation. And I'll say this again, it will trump your financial compensation. But the point is you can have both at the same time, and both can be rich and fair. Because nobody likes a system that's not fair. Isn't that right?
Speaker 2:I mean, if you're paying salaries, and I'll just use a clinical example. If you have a nurse over here that's making x cause she's been here for a long time, and then you have superstar hotshot right out of college, and she's knocking out like double the productivity visits or whatever. Everyone's delighted, happy. And then she looks around at the old timer that's doing two kinds of visits. They do the morning visit and they can squeeze in the afternoon visit.
Speaker 2:She's like rattling off six visits a day. Well, what happens after a while? What happens to your hotshot? Well, that person goes, why am I busting my can when I'm being paid the same amount as this old timer here, this and I'm doing more than double the work. And so at first, you know, there's some animosity maybe towards that person, but then they start to disrespect the immediate manager.
Speaker 2:And then the CEO and the entire organization till finally you lose them because you're paying in a very traditional way. Whereas this all could be handled automatically through the comp system if it's set up correctly or in a more intelligent way, maybe I should say. So this topic of compensation, again, it's thrilled me for years just because, again, when I was getting out of music, it was really my first the thing I really did, I was a programmer, and I was creating all these programming codes and then ended up directing programmers and making compensation systems, again, for factories, textile mills, country clubs, retail, all these different things before I got into health care. But I just found it to be just one of the most fascinating topics. And I think the big thing about studying compensation and the benefit of studying compensation is that there's this direct correlation between the comp system and the realities of human behavior, where you just have to get steely eyed real.
Speaker 2:How do people really behave? And so that brings some very hard questions really into everything. And what I realized is that you can solve virtually any frustration you have, whether it's a growth issue or a marketing issue or if it's a retention issue or if it's talent attraction issue, whether it's a quality issue. All of these things can be solved through the comp system. It's it's like your your baby.
Speaker 2:And as I wrote in an article recently, advice to CEOs and CFOs or CF knows of where the CFO needs to spend their time. And, of course, people development because we're human beings and human organizations serving humans. We have to understand the realities of human behavior. But the number two area where I want that CFO spending their time is studying compensation, studying human behavior, finding out what different organizations are doing, having pilots going on a pretty regular basis. And then they can put out their standardized reports and all this stuff.
Speaker 2:But that's kind of low automatic stuff. It better be accurate. It better be timely. All this stuff. But I want them working on the people, the true assets and liabilities of that organization.
Speaker 2:And let me say this, after twenty seven years of studying, again, and hundreds of organizations, over 1,300 at this point, Compensation is one of the quickest ways to create a healthy and happy organizational culture as well as rocketing your quality and financials. And some people are really surprised at that because they think, oh my god. We're gonna change the comp system. It's all about more money. I'm gonna get ripped off here.
Speaker 2:And there's all these phantom fears, which we will be talking about. But if you want people to really be happy, again, what is the path to happiness? They need to be pressed. They need to have some goals. They need to have some sense of of attainment that they've actually earned their paycheck, that they're worth all the money that you're paying them.
Speaker 2:That's a healthy culture. That's how you get happy people. And you want a system that will drive out your sub performers. We call them blessed subtractions because usually they're dragging everyone down anyway because they tend to be complainers and whiners and wieners and all that. But you want a system that gets rid of these people without you having to fire them.
Speaker 2:And the COMP system, of course, it'll do so many things for you. And then there's these academics out there. And boy, do I hear about these guys because I work with so many organizations that are attached to universities and research centers and all this. Just, you know, that's the health care thing. And, you know, people see lots of money in research and getting in the spotlight and getting their papers published and all this.
Speaker 2:But we get these academics, and I've hired three of these guys through the years to run, you know, different organizations and stuff because, again, I'm a pretty good picker for the most part, but all these have blown up in my face because there's one thing about theorizing, oh, this is how you'd run the modern organization. It's third wave management now, Andrew. And I just watched these guys pile on indirects, just really not thinking things through, and just driving these places into the ground. There's a big difference between theorizing how to run an organization and spilling blood, where you wipe out a hold of vision, or you get rid of that clinician or doctor that's been with you for twenty years because they're not doing their job, because they're not adding value. There's a lot of leadership in this too, but there's all these academics.
Speaker 2:They live in these utopias about how they want the world to work, and they're supposed to be bright and sophisticated people, and they don't have a clue because they've never done it before. And you can go through just scores of different leaders from Sam Walton, I mean, to Musk, to Jobs in the modern era. You can go to Carnegie if you wanna go back. All these guys worked with their comp systems, and they recognized this on some level. But the point is and Sam Walton, he said, you know, one of the biggest things we ever did, one of the our greatest moves was really working out that comp system, and and, of course, it produces a great result.
Speaker 2:It's it was one of the highest valued companies on the planet, you know, definitely the highest retail organization at various times. But the point is, I think these academics, they come in with a bias, and And I will admit, it's pretty hard not to have biases towards one way, whether you're right leaning or left leaning. You come in with some kind of prejudice about comp systems. Again, my advice is just go sit in the woods. I mean, it's been a few days or a week or months or, like me, years, watching the way this thing works, and and you see it playing out in, obviously, a somewhat more abstract form.
Speaker 2:Real, I mean, abstract in taking realities nature, and then we have to transpose those success patterns or what we see happening in nature onto a human organization that takes a little more thinking and skill. But that's essentially what we have to do. And then as we look at compensation, just applying logic, just logic to this. And we like to think that we're smart people, yet I don't think people live very logical lives when you get into it, but I don't want to make too many enemies right now. But the point is, labor is usually the number one cost in so many business sectors.
Speaker 2:Not all. If you have a highly automated factory, I realize you can run me the factory with five or seven Feet's. But healthcare, anything in the service industry and such, just a huge chunk of your proportion of cost is going to be the labor component. So it's like, duh, let's address the comp system to get the results that we want. And then the other reality is just virtually any organization that has achieved any level of scale or quality has employed Creative Compensation Systems.
Speaker 2:Now let's talk about how to structure your costs, at least on a macro level. And if we had a graph with your revenue and expenses, okay, there's a relationship between revenue and expenses. And if we had just a normal graph, we might have our fluctuations of revenue or sales or patient volume going up and down, right? Because it's never straight line up. You're gonna have the fluctuations or the oscillations of sales and revenue.
Speaker 2:But then when you graph the expenses associated with that revenue, it tends to be much more linear. And that is it doesn't normally shift with the ups and downs of revenue. And so therefore you make money when sales are high or patient volume is high. You lose money when sales are low or patient volume is low. And it takes no talent to do that.
Speaker 2:It's like so many investor guys, and I love to study these guys because a lot of it, I just look at it with high suspicion, having worked with so many hot dog financial people. It takes no talent to run an organization like that. It's just like your stockbroker going, well, we made money, the market was up. Or, hey. We lost money.
Speaker 2:The market was down. And if your guy says that, fire his ass. I mean, does that take any talent to do that? I mean, we should be making money when it's going up. We should be making money when it's going down.
Speaker 2:Right? If a guy's really talented and I'll just say this, most people aren't, and I definitely believe a fairly Warren Buffett like and and having some well placed shot and doing the long game and all that. But I've had times where I've just made tons of money when things are going down, and I take it as a buying opportunity. And of course you make money when business is good and all that. So it takes no talent to manage like that.
Speaker 2:But conceive of this, could you structure your costs to behave similarly to the fluctuations of revenue or patient volume, that you're making whatever margin, 20% profit, 14% profit, whatever, when sales are high? And can you make approximately the same margins when sales are low? Well, of course you could. And then of course the accounting guy from cost too back in college goes, Oh, Andrew, there's these things called variable and fixed costs. Of course.
Speaker 2:Of course. But we also know that all costs become variable over the relevant range if we want to get technical. But the point is we could do that through contracts and all this. Yes, we will find that our buildings, our plant operations and stuff relatively fixed, but that workforce, there's a lot we can do there. And we can design all kinds of deals with our vendors, wherever we're getting our supplies, our materials from.
Speaker 2:We can do arrangements with them if we get creative about it. And we can make them variable, which mitigates the risk to an organization to a huge extent. And the other ideal we want is that through our comp system, we create a system of mutual reliance. That is where all parts of the organization work together. The multi view model, this thing that we've been using for years, again, we don't use traditional budgets for ongoing operations.
Speaker 2:Budgets are fine for building projects of a fixed period of time, but not for ongoing operations. We need dynamic feedback of when things are going up, this is how much money is available for this expense. When sales are down, this is how much, but it needs to go up and down, that dynamic feedback so we can make our managerial moves with a great deal of precision. And then we make all organizations from your core operations, working, doing their thing, marketing, doing their thing, all the indirect supporting, HR, IT, compliance, everyone doing their thing, but they're all linked together through the comp system, again, to create this system of mutual reliance. Because you wanna really wire this thing like a human body that if, you know, you're sick or if my hand doesn't work from the playing through the years, Well, something's wrong with the organism and it's not functioning the way it should and saying that, hey, pay attention to me.
Speaker 2:Right? Pain gets our attention. But we want to make our entire system somewhat codependent so that you don't have silos, because when you have silos in an organization, you have sickness. It is not operating like a natural system where everybody's on the same team. So you'll have some, you know, wacky CFO doing their thing over here, and you'll have your ops head doing something over here going in a different direction.
Speaker 2:And they don't come together, and you have broken promises, you have unfulfilled commitments, and you basically are just killing your quality and reputation. So, again, you want to develop this natural system of mutual reliance, where everybody's working as part of this integrated, cohesive whole. The other thing too is if we do well in our organizations, we manage well that is, why not pay your people well? It's just not a great experience when you perceive somebody as being greedy or the hoarder guy that wants all the marbles, wants all the nuts, all come to me, baby. No.
Speaker 2:Some of your greatest joys are making that huge paycheck out to your people. Right? I mean, to bring people on the journey with you that everybody's pitching in, everyone's doing their part, everyone's reaping the rewards, and you wanna make them as rich as they can be. And our formula is basically this, fewer people paid well. Fewer people paid well.
Speaker 2:And that works out because most places are overstaffed. And you can build all kind of redundancies in your system, and we'll go through some of that because we make that as part of the pay program that there needs to be at least two people that can do every critical job in an organization, and you can tie it to HR so they're monitoring that. But that's an example of a standard in an organization for which they're receiving a paycheck. So if we're managing well, yeah, don't get greedy. Share it.
Speaker 2:And there's a lot to that. And anymore, I'll just say this. At this point, I don't really work from my own paycheck. I probably should have stopped working years ago, but work is important to me. It gives me meaning to my life.
Speaker 2:I'm working more in the organization really as a ministry to help people along, to give people opportunities, to grow folks, to share. Sure, I like to have a paycheck just like the other guy. I mean, I got things to do and all kinds of activities that I like to fund or keep myself occupied. So I think you still need to have that on some level, but helping others along the way is just a great thing. And I always ask folks that have worked at MultiView, has has MultiView changed your life?
Speaker 2:And the answer is always, absolutely. My confidence is way up because that's the one thing that a comp system will do. It builds confidence in people where they believe in their own capabilities. They know that they're not a child, that they're a mature professional, that they're earning their keep. And there's a lot of satisfaction, especially as much as I expect them to know regarding technical knowledge and know how, you know, as well as the philosophical understanding behind those techniques and methods.
Speaker 2:I expect a lot. And I'm not afraid to push people, but I'm very liberal in how I share it, whether it be through the direct comp system. I mean, if they're really great, I'll give them shares in in different entities. But it's just great to take people on the right. So if you're a winning company, go ahead and share the gains.
Speaker 2:And everybody wants to be part of a winning organization. Right? And that paycheck, especially if it goes up and down with their achievements, is a signal every payroll cycle or run that the organization's winning. And they're also being signaled when it's not winning. It's like, god, we gotta get creative.
Speaker 2:We need to get off our duffs here. We need to make something happen. We need to make some sales. Now with this said, most people want more than they currently make, and there's nothing wrong with that. And I think it depends on where you are in life.
Speaker 2:And for so many years, I was, you know, that guy. I wanted to do better because, again, we all have hopes and dreams. We have needs. We've got things we want to do and all that. And most of us would prefer to make more than we're getting right now.
Speaker 2:And I think that's completely healthy. But I hope these direct words help, and we're going to continue. And the thing about this particular series of messages is I just want to be clearly spoken. I wanna speak plain, no BS, and just put it out there and not be in such a production to get through it, but to fully explore it. Because sometimes it's one or two ideas or in the mannerism that something's been presented that a person has a breakthrough, and then they summon the courage to say, hey.
Speaker 2:This is what I need to do. This is what our organization needs to do. And we don't know when that's going to happen, but I like the idea of just putting it out there and letting it do its work, not trying to impress anybody, not trying to convert anybody, but to say this is what we've learned so far and hope that it's of some help.
Speaker 1:We hope you are having the best day of your life. If you need something further, just visit one of the Multiview Incorporated websites or contact us through social media. Smoke signals, carrier pigeons, telepathy have not proven reliable. All calls are answered within three rings by a competent real person. Thank you for listening.
